Foreign funds cut Nigeria exposure, impact limited – analysts

Reuters – Nigeria’s buoyant real economy and strong domestic liquidity will limit the damage caused by hedge funds and portfolio investors pulling money out of the country as the global financial crisis bites, analysts say.

The sheer size of Nigeria’s economy means it has been the main beneficiary outside South Africa of a rush to invest in Africa in recent years. Hedge funds and private equity firms from Asia, the United States and Europe have all put money into its equities and bond markets.

That means that, on paper, sub-Saharan Africa’s second biggest economy is one of the most vulnerable on the continent as institutional investors around the world struggle with tightening credit lines and become more risk-averse.

"We have certainly moved away from the situation where everyone was scrambling to get something in Nigeria, where everyone needed exposure to Nigeria," said Razia Khan, head of Africa research at Standard Chartered in London.